There are all kinds of do-it-yourself legal services out there today. Many people use LegalZoom and Google to create legal agreements to memorialize business deals with their customers and clients. (See "Top 10 reasons why a contract should not be a DIY project".) However, one thing internet tools can’t do is review the contracts you receive from service providers. This review is necessary to make sure you are not agreeing to provisions that can potentially cost you thousands of dollars and major legal headaches in the future. For that, you must hire a real live attorney.
To better understand the problems that can arise without legal review, you must know that most contracts are written in a way that benefits the drafter. Therefore, the party that presents the agreement typically has at least a slight advantage with regard to its terms. And, if you are like most non-lawyers, you either don’t read the contract at all or you skim the first few parts and then your eyes glaze over when you get to the parts that really have the most legal significance. Even if you are diligent enough to read every word of an agreement, there are certain words that have particular significance when used in a legal context—significance that is not obvious to a person without legal education and experience.
At this point, you are probably thinking, “How bad can it be?” Well, within the past week, I have reviewed contracts with provisions so heavily weighted toward the other party that they were unreasonable for my client. These contracts were totally different in nature and were reviewed for two different clients in totally different professions. I am going to share the essence of the unfair provisions without giving enough detail to divulge any confidentiality I owe to my clients.
The first example was a provision in an NDA (non-disclosure agreement). NDAs are usually shared between parties to protect any proprietary information they must share in order to conduct business with each other. In almost all situations, the law provides that the accuser has to prove that the accused was guilty of the wrongdoing (in legal terms, the accuser has the “burden of proof”). This NDA had a provision that would have shifted the burden of proof to my client. In other words, if the other party sued him for revealing or using confidential information, my client would have had to prove that either the information shouldn’t have been classified as confidential or to prove that he didn’t reveal or use the information improperly. This is not a provision you would ever want to agree to. The person suing you should have to prove his accusations—not the other way around.
The other example was contained in an agreement for services from a software provider. Almost all contracts contain provisions for term and termination. These provisions describe how long the contract is in force (the “term”) and how a party can terminate the agreement before the end of the term. It also describes what happens if a party tries to improperly terminate a contract prematurely. In this case, the contract had a provision that said if my client tried to terminate the contract early for any reason, my client would have to immediately pay the full amount that would have been due for the full term of the contract. My client would have owed close to $50,000, if she terminated the contract early for any reason—and this is a contract that had a term of three years. It may not be obvious why this is a problem. Of course, a business needs to hold its customers to contract terms so it can create a budget and be assured it can meet its financial obligations. But, what if this service provider fails to provide the service it has promised in the contract or bills the customer for substantially more than what was agreed to? Without a modification of this provision, my client would have no recourse if the business did not fulfill its end of the deal. This is why my client should never agree to such a provision—and neither should you. If the business breached the contract, it would have cost my client a great deal of money and she would have had no legal argument against it.
There are many other situations where the provisions of a contract are weighted heavily in favor of the drafter. (For example, some employment agreements require an employee to assign all of his IP rights to the company if he creates something while in the employ of the company.) It usually requires a thorough legal review to ferret out these provisions and to negotiate terms that are fairer to both parties. Even if you are in a situation where you are dealing with a large company whose contracts are non-negotiable, you need to understand the terms before entering into a legal agreement.
The internet can do a lot of things for you but it can’t review your contracts. Hiring an attorney to do a review before you sign an agreement can save you a lot of money and headaches in the future. Consider that the next time you are asked to sign a contract.
If you have a contract that needs review, please contact me to schedule a conversation about how I can help you.